With Europe, the BBA, and virtually everyone shocked, shocked, that the global bank cabal schemed and colluded for years to manipulate interest rates, so far only America appears relatively blase, and totally ignorant, about the issue. Perhaps it is because the first bank exposed in the manipulation scheme so far is European, perhaps because it is just tired of all the endless crime coming out of the criminal complex known as Wall Street. It is unclear. Then again, America will soon have its own manipulation scandals to deal with: and if it is not the US BBA member banks, all of whom were just as guilty as Barclays, and the only question is which bank will be the sacrificial scapegoat whose CEO will have to demonstratively depart (to warmer, non-extradition climes), it will be the following story from Bloomberg which will likely pick up much more steam over the next weeks and months, detailing how the bank which just barely avoided a triple notch downgrade (wink wink) has had previous dealings with the very same rating agencies seeking to, picture this, artificially inflate ratings! So to summarize: Fed manipulates capital markets, HFT manipulates bid ask spreads, "self-policing" CDS pricing market groups fudge the prices on trillions in Credit Default Swaps, bank cabals collude and manipulate short-term interest rates, and now banks are confirmed to have manipulated the ratings on tens of billions of bonds using monetary incentives and threats. Is there anything in this "market" that was fair over the past several decades, and was actual price discovery ever actually possible? Because by now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.

The unsealing of the internal documents from Moody’s and Standard & Poor’s came in one of the largest ratings lawsuits to emerge from the 2008 financial crisis. The lawsuit was filed in 2008 by Abu Dhabi Commercial Bank, based in the United Arab Emirates, and Washington’s King County, which includes Seattle.

As Morgan Stanley bankers were designing the Cheyne notes, they asked Moody’s to use the same volatility assumptions for subprime-backed mortgage securities as for those that had prime home loans as collateral, the investors allege in today’s filing. The ratings company agreed, the investors claim.

“We in fact built everything,” Dorothee Fuhrmann, an executive for New York-based Morgan Stanley, said according to the documents, allegedly referring to the risk-analysis methods applied to the Cheyne ratings.

This is where it gets good:

Morgan Stanley successfully pressured New York-based S&P to raise its rating on some of the Cheyne securities, according to the plaintiffs. After Lapo Guadagnuolo, an S&P employee, told Morgan Stanley that some of the securities would get BBB ratings instead of the desired A grade, a banker e-mailed his boss and said the ratings were “very inappropriate.” S&P then agreed to give the higher rating.

Morgan Stanley earned fees totaling as much as $30 million when the Cheyne notes were issued, according to the documents.

“All of us were under instructions to rate everything that we could bring in the door, and they were measuring market share on a monthly basis,” Frank Raiter, a former analyst of residential-mortgage bonds at S&P, said in a deposition, according to the documents.

“I wasn’t real confident we were doing a very good job at it.”

Perry Inglis, the head of the S&P group that rated the Cheyne securities, wrote in an e-mail that it would be a “good idea” to figure out how to change its methodology to be more “competitive,” according to the court filing.

And the punchline:

“I’m a bit unclear if it is a big change or a ‘wee itty bitty no-one’s going to notice’ change!” Inglis is quoted as saying in an e-mail.

Turns out someone noticed.

Reuters' Allison Frankel points out that this discredits the rating agencies, who are once again exposed for being corrupt, complicit and arguably, criminal organizations, betraying any core values for the client's buck.

In a series of filings in federal court in Manhattan, Abu Dhabi Commercial Bank and its lawyers at Robbins Geller Rudman & Dowd disclosed thousands of pages of internal communications and deposition transcripts to back their claims that S&P and Moody's are liable for fraud and negligent misrepresentation in connection with their rating of a structured investment vehicle underwritten by Morgan Stanley. Based on a declaration by plaintiffs that accompanied the documents, a huge percentage of the newly disclosed material has never previously been seen by the public -- and a good many of the documents deal not just with the Morgan Stanley SIV but more broadly with the rating process inside S&P and Moody's at a time when the two leading agencies were swamped with mortgage-backed securities to rate.

Robbins Geller also provided a helpful CliffsNotes version of the evidence in the form of an unredacted response to the defendants' motion for summary judgment. (A redacted version was filed in February, with page upon page blacked out.) This is a hot filing. Abu Dhabi quotes deposition testimony from "S&P's most senior quantitative analyst in Europe," for instance, that says "the ratings of (the SIVs) were inappropriate because the ratings of the underlying assets were not appropriate. So it leads to the conclusion that they should not have been rated." In other snippets quoted in the filing, rating agency analysts complained about "difficulties in explaining HOW we got to these numbers since there is no science behind it" and about "(making) up haircuts that were palatable to SIV issuers."

A lead S&P analyst on the deal, according to the plaintiffs, said in an email to his boss that the default rates the agency was using for asset-backed securities were guesswork. "From looking at the numbers it is obvious that we have just stuck our preverbal (sic) finger in the air," the analyst wrote.

Naturally the blame also lies with Morgan Stanley, for knowing fully well it was openly defrauding the rating process:

Morgan Stanley, according to the plaintiffs' filing, bears at least as much blame as the rating agencies: The bank allegedly wrote the Moody's report on the SIV and read the S&P report before it was released to investors. The summary judgment opposition points to evidence that Morgan Stanley pressured the rating agencies to apply methodology that didn't suit the securities and to ignore the paucity of historical data in order to grant the SIV a rating it didn't deserve. By sending a supposedly "threatening" email to an S&P higher-up when an analyst proposed granting the SIV a BBB rating, Morgan Stanley boosted the rating to an A, the plaintiffs assert. In support, they quote an email from Morgan Stanley exec Greg Drennan, who had sent the allegedly menacing email: The bank's efforts, Drennan wrote, "did get us the rating we wanted in the end."

Of course they did. You paid and threatened to get it. One wonders (not really) if the same series of events occurred last week when Morgan Stanley got just a two notch downgrade from Moody's instead of the much anticipated 3 notches.

One also wonders (not really) when US regulators will go after Morgan Stanley with eagerness that British regulators appear to be pursuing Barclays?

"I'm shocked, too" (sarcasm never on in cases such as this)..."now give those folks a raise for corrupting the system just like i told them to." LET US APPLAUD THEM...for if any of us could do so successfully...we would.

You guys should all stop complaining and just thank God every day for the complete and total worldwide economic collapse that I've been baiting for the past 12 years. Egos and criminal minds are so easy to manipulate to a specific outcome. It was the only solution.

I will thank God when it is really, really, real and not just out of reach. I don't care if there is global chaos. Nation rising up against nation, earthquakes and famines in various places. People fainting with fear for what is coming over the world. Let the birth pangs begin. The water has broken, let's go baby!!!

We have parallel ZH careers. I've been happy to have the delay for several reasons: 1. I get to stack deeper and higher 2. "They" have kept the PM prices slow in rising 3. The longer the end is delayed the more thoroughly cleansing it will be

the issue with all of this is that it damages S&P and the ratings agencies a lot more than the financial institutions. Why is this important? Because the rating agencies need to downgrade said financial institutions shortly, and since these banks are already taxpayer and Fed funded they can hang on and get the advantage of claiming that downgrades don't matter when the rating agencies are on the take and innacurate....

For example they've downgraded the Rabobank (a triple-A bank) a few notches, based on ... what exactly? Especially compared to the ratings of their peers this makes no sense. I'm all for more realistic ratings, but then many other banks should be downgraded much more. The relative difference, between the former AAA (Rabo) and the formerly 'almost A' banks, is still there...

Despite tricks like this the Rabobank is one of those banks that could and can borrow money at much cheaper rates than should be possible (see recent LIEBOR chart). Of course they do suffer from these games and have to pay more, but clearly 'the market' knows that the numbers are rigged & so borrows them money cheaper than should be possible based on ratings, CDS and LIEBOR.

Ergo we have a number of banks (the 'in-crowd') with inflated ratings, who claim to be borrow money on the cheap (while many know this to be false) and have a too-good-to-be-true CDS's. Their financial statements look like Swiss cheese, even without correcting them for obvious fraudulent misrepresentation of their 'assets'. All of them have ridiculous large derivative positions, all perfectly hedged of course (LOL). Instead one should at least include realistic counterparty risk in those derivative valuations (say 1% loss, or 0.5% or ...) and look what happens. Can the big 20 really cover that additional loss of at least a couple of trillion? I don't think so.

And we have another set (medium or big but not the in-crowd) who are financially OK, but get comparatively lower ratings, have relatively high CDS, yet can borrow money in the open market at 'impossible' low rates. Still they pay too much when we compare financial statements & especially the quality of assets. 'Netted' derivative positions can hide any size of hole, something which is not so easy to do for a bank which has most of its assets in real estate.A case of double standards.

Same is true for countries. 'The markets' (i.e. mostly the same set of banks) are 'concerned' with the Eurozone, yet if that where a real concern they would be looking at JP, US and UK first. I'm not saying that there are no EZ countries with issues, but the fact is that the EZ combined is in much better shape than JP, UK or US. And this is not properly represented in the numbers.Part of this can be explained by 'the market' being prejudiced and running along with the latest fad; but to this extent? Obviously there is manipulation.

To say that the EU market authorities are 'suspicious' or 'concerned' is the understatement of the year IMHO.So did money change hands? How much money was paid to the rating agencies & by whom? And why: to make a buck, to hinder the competition, to make themselves look not so bad in comparison or ... all of those?And, importantly, can that be proven?

Its not just banks - there has been a laxness in enforcement in the name of free market. Our government has abdicated its responsibilities essensially admitting it is incapable of comprehending or dealing with the capitalist system. It is essentially every man for himself at this point there is no authority to appeal to - the government is now absorbed in self preservation. The void is being filled by the babble of the likes of krugman. Benanke has only succeeded in demonstrating that we have no idea how this system really works the only achievent he has is to make some rich people richer and totally wiped out the concept of efficient allocation of resources. For this he went to college
What really creates growth and broadbased prosperity - bernanke has no clue.

It would be ok if what you say is true, but unfortunatly it's not "every man for himself". That I can handle. The reality is the opposite, a quickly escalating fascist structure where you are only safe if you have a large well armed and financed army behind you.

Unfortunately, only actions will change anything from here on out. One reason TPTB don't want to stop any of the wars or police actions, or whatever the fuck you want to call it, around the world is because should they bring my brothren home these good folks would find themselves rewarded for their service by being unemployed and at the bottom of the social structure. TPTB know that these folks can commit to getting shit done. I know several members of delta that are getting restless already.

I've often wondered how happy the troops are with Captain 'O' and the thought of putting their lives on the line for Goldman, Exxon and Haliburton. Oops. Haliburton owned the last guy, who replaced them on the list?

Falling prices are un-American and dangerous to the economy, at least that is the thought that Bernanke's Fed has made ubiquitous.

ZeroHedge is considered dangerous for advocating free markets and liquidation. Ironically, these steps were once considered part of the natural economic cycle. Now they are considered financial terrorism.

However, the real "public" for whom this news is of concern are all our overseas counterparties. And they are very interested in this due to having repeatedly losing huge sums of money to these scum...payback will indeed be a bitch.

Yes, they are quiet, are they not?Placid, warm, comforting, in the arms of entirely benevolent pleasant specter of quiet and soothing calm.Drifting on a warm stream.No wonder the shits so bloody addictive.

They gave me a drip with a button to push to increase the dose. I pounded that button for all it was worth and they cut me off after 3 refills. I'll never forget the look the PA gave me when I asked for the 4th bag of saline/morphine. "No more for you..." LOL : )

These guys better hope and pray that the end of world scenarios, so frequently pontificated on this site, never come to fruition, for there will be nowhere to hide and mob justice awaiting them if it does.

There is a saying that goes something along the lines of (apologize for not having the quote) 'Most people don't knowingly do evil deeds...they just convince themselves with their own logic that what they are doing is just'. Something like that. Someone please put the quote up if they know it. I think it's by a Russian philosopher. Anyway...are these people just evil or is there some reasoning to their madness, in their own minds, when they knowingly manipulate the system like this or in the multiple other harmful ways. Crazy shit. My vote is they are just evil, greedy bastards. They should all hang for fucking it all up for the rest of us.

I suspect there's more truth in that idea than we'd care to admit, but I say fuck it, we're not ever gonna be able to judge a man's soul . . . but we can still hang his ass for taking part in the crime. Or conspiring to conceal it.

NEW YORK — Billionaire investor Warren Buffett on Wednesday defended credit rating agencies that gave overly positive grades to mortgage-related investments before the housing bust. He said the agencies were among many who missed warnings signs of the crisis.

How much you want to bet that any training for the rating agencies and indeed all of Wall Street's analysts now include a segment regarding not putting anything like this in email and rather saving it for face to face discussions or telephone conversations?

Yeah, life in morally responsible corporate America. Not only will it be reemphasized in the training, but employees will be specifically informed that "violation of this and all company policies may lead to termination and other applicable penalties under law" in the Honor Policy they are forced to sign.

They'll spin it off as if it couldn't happen unless people were saying "inappropriate" things in email, then attack that behavior as if it will solve the actual problem, threaten punishment of those who do not properly adhere to the "solution", and document that they gave it their all to correct all the "confusion and misunderstanding" that allowed these awful things to happen.

"If they happened", which I doubt they'll ever admit.

Your Honor Pledge aknowledgment gets attached to the many sheets of attestations that you've read and understand the thousands of policies and procedures you're unmistakably expected to sign off on without reading when you either hire in or get "refresher" training.

It's how corporate corruption gets papered over as a deep commitment to ethical behavior. We don't talk about it, but most of us see it going on at work, regardless of the setting.

Sunday morning “discussion” programs yesterday discussing Obama care and other things brought up an excellent bit of wisdom. In the discussion about Holder and the gunrunning to Mexico program that Holder has stonewalled about, there was this comment from the left. “ Holder has not put some of the $6000 Wall Street suits in jail, and that is why people are angry”. At least he was partially right.

While the too big to fail has been applied to banks and GM and and and Spain and and, IF we look at the trees and the forest at the same time, real World USA 2012 appears to be a society of criminality that is TOO big to eliminate before it totally destroys ------ and at this point, indigenization and worst case projections appear to be naive.

Our country has cancer. It is in process of killing off the structures, concepts, economy, and enforcement of laws and regulation. If this cancer is not removed and eliminated it will do what cancer does to all that host it. It kills the host.

Anyone with a good knowledge of charts "and" patterns can easily see why sp 400 is in the cards.

Thing is........so can the technicians that the FED hires and they are desperately trying to avoid it. So far they have one the small battles. However after trillions and trillions and lies lies lies and more lies.........the big macro chart is still in full play with a high% chance of playing out.

They haven't changed anything except putting a flimsy bumper guard at the edge of the abyss and a few twigs to grab onto on the way down.

There were clearly better choices to spend gazillions on but saving a half dozen rich bankers was all they could manage to do, and temporarily at that.

The day our forefathers made up a piece of paper saying to the world corporations are not people, and the colonists hereby proclaim the right to tell the Central Bank of England, the King and Queenl, along with the Rothschilds, India East Company etc. etc.

Very simple. If your Number 1, Number 2, or Number 3 campaign contributors broke the law.....then the law must be wrong. Let us, on this July 4th, celebrate our self-correcting system of checks and balances.

Holy Crapoli Batman - wait a minute, these are only allegations (like those against J Travolta).

These things get serious if there is an actaul judgement (in two years, after appeals) however that doesnt happen if the matter settles out of court for an undisclosed sum (....yeah, you got me this time .... here's some of your money back).

....and the bankers and their circle jerk buddies rewrite the meaning of "cake and sodomy." What more does the public need to be absolutely outraged? These deplorable oxygen thieves need to be publicly executed. If the regular public steals something they go straight to the for-profit prison system. If a banker or his buddies steal from everyone else, they get wrist-slapped, if anything, then start the next day, business as usual. It's getting more and more difficult to be proud to be an American. The corruption runs so deep permeating every alphabet circle jerk agency the light at the end of the tunnel is almost non existent. I just don't get it anymore.

...but dont they still cherish and respect us as citizens, because we're all special little democracy unicorns, and the lazerbeams of love shall shine from our eyes and banish the darkness in their hearts? SCREEEEECH(sound of needle comming off the record), jail the useless motherfuckers.

It's all fascism, pure and simple. Fascism is the merger of state and corporate interests. The banks and financial industry are the biggest component of the economy and are running the state, and picking the winners and losers. We are all losers.

Nothing will happen until the American sheepole demand justice. Unfortunately 90% of us are too fat, lazy, stupid and comotose from eating HFC, fast food and poppin doctor's pills daily to give a damm.

I thinks the Mayan's should have founded a hedge fund..December 2012 puts lookin pretty good these days!!

Okay. All we gotz to do is learn how to play in a corrupt system. So start a satanic investment cult and offer the soul of a member for a satanic sign of what to short or arb etc. Get a voodoo priestess out of New Orleans or better, Barbados. She will make little Dimon, Bernanke, Geitner, Blankfiend dolls to work wit the chicken entrails. 100% gains per day.

This is fraud, clear and simple, on the part of Morgan Stanley, and of the ratings agencies mentioned. OK justice department, get to work, and don't forget the actual people who did it, not just the corporations.

Interesting that Holder finds his ass in a congressional sling only days before a tsunami of evidence of corporate crime rolls in.

I have no doubt he would ignore it in any case, but what are the odds that if he didn't Issa and his buddies would scream about Holder being a political opportunist conveniently seizing the chance to put himself in a different light while serving Obama's socialist agenda by attacking Wall Street, the mecca of job creators?